Will Real Estate Ever Calm Down? How to Invest in this Wild Sector in 2022
It’s no secret that real estate was a dizzying roller coaster ride in 2021. If you didn’t get into real estate investing last year, here’s a quick recap of what happened:
The pandemic completely distorted the real estate buying process last year. Low mortgage rates combined with a shortage of inventory combined with a desire to move far away from the office (hello, permanent remote work!) Resulted in a boiling real estate market. Homes literally sold within hours of being listed, in some cases three times the asking price.
Let’s find out how to invest in the real estate sector in 2022.
What happened in 2021 and will that change in 2022?
So can we expect increased prices, low inventory levels and fast turnaround times? Let’s find out what happened in 2021 and how it could affect this year in terms of rising mortgage rates, changing price trends, and scarcity.
Rising mortgage rates
The Fed has already promised to fight inflation fires with up to three rate hikes from next spring. The key interest rate has been close to zero since the beginning of the pandemic to help the ailing economy
Freddie Mac states that the 30-year fixed-rate mortgage rate only rose 0.3% between January and November 2021, but rates could rise 3.5% by the end of 2022. Realtor.com says 30-year fixed-rate mortgage rates will rise to 3.60% by the end of 2022, compared to 3.30% now on average. As you can see, however, mortgage rates aren’t going to hit double digits (so nothing ridiculous) which is good news for real estate investors.
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Change price trends
Experts are forecasting higher property prices for 2022, although the price development will be more moderate compared to 2021. According to Realtor.com, real estate sales prices are expected to rise 2.9% this year.
For sector investors, this means being wary of the fact that prices will continue to rise, particularly in some parts of the country. Bid wars also wreaked havoc on property values - hungry buyers bought homes for twice and three times the homeowners asking price. However, bidding wars could break out at the beginning of the year.
Better, but still a little rare
Buying real estate may not be easy, but it may be easier than it was last year due to the still appalling but diminishing inventory shortage. Supply chain problems and labor shortages will decrease, although according to Zillow studies, the scarcity will keep homebuyers chasing their tails in 2022 as well.
How to invest in the real estate sector
Would you like to invest in the real estate sector without having to flush toilets or paint walls? (They know there are easier ways to make money.)
Try your hand at REITs
Real Estate Investment Trusts (REITs) own and invest in real estate. They allow you to buy shares in commercial real estate portfolios and earn money without having to buy or manage the property. You can buy publicly traded REITs directly or buy them through mutual funds and ETFs. Let’s go over a few options that you might want to consider.
Annaly Capital Management Inc (NYSE: NLY)
Annaly Capital Management, headquartered in New York City, invests and finances residential and commercial real estate through agencies, home loans, trade loans, and mid-market loans, and invests in agency mortgage-backed securities. For the third quarter of 2021, Annaly reported GAAP net income of $ 0.34 per average common share for the quarter, available-for-distribution earnings of $ 0.28 per average common share for the quarter, a decrease of $ 0.02 from the previous quarter and an economic return of 2.9%. for the quarter.
Annaly Capital Management announced quarterly dividends on its Series F Preferred Stock, Series G Preferred Stock, and Series I Preferred Stock.
UMH Properties Inc. (NYSE: UMH)
UMH Properties Inc., headquartered in Freehold, New Jersey, owns and operates manufactured residential communities. (Manufactured houses are similar to mobile homes). Due to rising real estate prices and higher rents, providers of cheaper living space such as UMH Properties can give your portfolio some momentum.
UMH Properties also rents commercial properties to private prefabricated house owners. UMH owns approximately 127 parishes, primarily in New York, New Jersey, Pennsylvania, and Ohio.
The company reported total revenues for the quarter ended September 30, 2021 of $ 48 million compared to $ 43.1 million in 2020, an increase of 11%. Net loss attributable to common stockholders was $ 3.4 million, or $ 0.07 per diluted share, for the quarter ended September 30, 2021, compared to $ 12.7 million or $ 0.31 per diluted share diluted stock at the same point in time in 2020, along with a dividend yield of 3.10%.
Essential Properties Realty Trust (NYSE: EPRT)
Essential Properties Realty Trust Inc., headquartered in Princeton, New Jersey, acquires, owns and manages single-tenant properties that are long-term net let to medium-sized companies such as Captain D’s, Art Van Furniture, Mister Car Wash, Zips Car Wash, AMC Theater, Perkins, 84 Lumber, Mirabito, Ruby Tuesday and White Oak Station.
Profit is expected to grow 19.76% per year and profit 40.8% last year. Directors have approved a quarterly cash dividend of $ 0.26 per common share for the fourth quarter of 2021. On an annualized basis, this dividend of $ 1.04 per common share represents an increase of $ 0.04 per share over the previous annualized dividend.
Crowdfunding companies pool smaller amounts of money, and investors can take advantage of this investment method by just investing dozens of dollars like Fundrise. The company charges an annual advisory fee of 0.15% and an additional annual asset management fee of 0.85%.
RealtyMogul offers funds that are geared towards growing or generating income from commercial real estate debt for those who want to go beyond investment strategies with a focus on stocks or bonds. The fees include an annualized service fee of 0.5% and an annualized asset management fee of 1%, based on the total share value of the REIT.
Yieldstreet trades in real estate bonds and investments as well as other industries. The minimum investment is $ 500 and the fund has a 0.5% annual fee and a 1% management fee.
Look at the trends
Before you get excited about investing in real estate, analyze the broader market and consider other alternatives like REITs and crowdfunding. However, watch out for your service and administration fees – these can get you as much as brokerage fees (for regular investments) and property taxes and home insurance (for real estate).
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